‘Big Short’ investor Danny Moses says the SVB crisis is speeding up the US economic slowdown
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“The Big Short” investor Danny Moses said Silicon Valley’s shocking collapse is worsening the US economic slowdown.
“If you believe it’s [the economy] going to slow down, it just accelerated that slowdown because banks have to really to pull back in their activities,” Moses said in a CNBC interview on Tuesday.
The US economy has been in a precarious position as it faces high inflation and surging borrowing costs. The Federal Reserve has hiked its benchmark interest rate from nearly zero to upward of 4.5% over the past 12 months. Higher rates encourage saving over spending, which typically pulls down asset prices, saps demand, and increases the risk of an economic slowdown.
Exacerbating those economic worries was SVB’s stunning collapse.
The US government Monday bailed out the go-to lender for start-ups in what was seen as an effort to prevent the collapse from spiraling into a broader crisis. But according to Moses, regulators don’t have a clue of what’s in front of them.
“You can’t assume that the regulators have any idea what they’re actually dealing with now considering that they were completely caught off guard… by what just happened at Silicon Valley Bank,” the former FrontPoint Capital lead trader, adding that SVB’s bailout “should make people nervous.”
“The Fed is kidding themselves if they think this situation is just going to go away,” Moses continued, adding that markets are underestimating what the fallout could be from the Fed’s rapid interest rate hikes.
He also warned further trouble lies ahead, as issues still remain on bank balance sheets from commercial real estate and auto loans.